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Peter Riva

View from the Edge

Peter Riva of Gila has offered his many years of columns for this online newspaper. His writings have been published in East Coast newspapers, and he decided to share them with me and you, our readers.

What Is The Middle and Other Bad Math

by Peter Riva - Sept. 25, 2012

The middle class, middle-income families, median income. They all sound the same. In this election year we’re going to hear all politicians talk about the middle, but middle of what? Let us first look at the use of the word middle. The President used the term “middle class tax cuts” and used the figure of “less than $250,000.” For Romney, he uses the term “middle income people” which he classifies as those earning “$250,000.”

There is a joke amongst economists, “If Bill Gates walks into the bar, the median income of every person there jumps to $1,000,000 or more.” If you average wealthy people in with the masses, it looks as if they make more. For Romney and the President, by setting the “middle” at $250,000 they are both spinning the median income of America much, much higher than it is. According to the experts at the Tax Policy Center (an independent group), the median (meaning real middle) income of the worker in the USA is just about $50,000. In fact only about two or three people in a hundred (2%-3%) have incomes above $250,000. So if the President and Romney use the term “middle” to include these people earning $250,000, then they are actually referring to 97% of all Americans. That’s hardly the middle of anything.

“These are people who pay no income tax. Forty-seven percent of Americans pay no income tax.” Romney’s point was that he thinks these people are dependent on state handouts and, of course, since he wants to stop these handouts, they are unlikely to vote for him. On the face of it Romney’s numbers are about right. In 2010, 46% of American paid no Federal Income Tax, but the idea that all those Americans are living on handouts is plain wrong. The Tax Policy Center has crunched the numbers: 60% of Romney’s 46% file Income Tax returns but pay no additional income tax – in shot they have jobs and pay payroll taxes. You should know that payroll taxes pay for the Medicare and Social Security programs 100%. And Social Security and Medicare account for 33% of all tax income and expenditure of the USA. 20% of Romney’s 46% are retirees who paid into the system for decades and are now retired and pay no income tax because their income is too low. And, of course, 12% of Romney’s 46% are military or government retirees getting retirement or disability pay. That leaves just 8% of Romney’s 46% that may be receiving government assistance. Strange that the 8% is about equal to the rate of unemployment. And stranger still is that Romney doesn’t think working class families (paying no additional Income Tax) won’t vote Republican. He’s wrong, last time 38% of them did.

But the Democrats are not above spinning numbers. “We’ve added 4.5 million private sector jobs in 29 months, since we came into office when we were losing 800,000 jobs a month.” Well, yes that is true and not really misleading. But it is also cherry-picking the numbers you want people to hear. What’s wrong here is that the Democrats are using their starting point  (“29 months” ago) for new jobs from the absolute bottom of the employment chart. The job slump that happened during this Presidency (the first 14 months) is being attributed to the last Administration. Great economists are debating the validity of this accounting period of time, many saying that the economy for the first 10 months of a new Presidency is to the credit (or fault) of the previous Presidency. If this President fixes unemployment, in the long term, I am sure Democrats will take credit for all the job numbers and months, not just those that work in electioneering. Credit and blame in politics is nothing new.

Political interpretation, in an election year, will fight tooth and nail to label the argument and a definition of “middle” the way that suits them. The voters’ responsibility is to sort out the nonsense from the truth.

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